When should I start getting nervous? Cant find a good tenant!!

74 Replies

@Allyson Edwards I think your best bet at this point is to do a lease option or just outright owner finance it. Assuming you get the price you want and the process goes smoothly, you will have better cashflow from owner financing/wrappable mortgage (no insurance, management, maintenance, etc to pay for). Have an RMLO (Residential Mortgage Loan Originator) screen your buyers so you have better protection and a hands-off approach.

I did this with a property I got into some trouble with earlier this year, and I was able to take a losing deal and turn it into a win. Although you miss out on the tax benefits, appreciation and principal pay down as you would on a rental, it's a good backup strategy in case things go awry. Good luck!

@Allyson Edwards I agree with your thesis apart from the numbers. NC is growing fast. You picked a great state (probably either the best or second best dollar for dollar). Plus Amazon might rank RD up at the top of the list for HQ2. That would almost certainly lead to speculation. But then you get back to the numbers. Clearly that was the only part of your analysis that needed any change. One small bit of advice: be super wary of rent info coming from a broker. I’ve been told by brokers that I could rent a unit for 1400 when really all I could get is 1100. They are going to paint a rosy picture esp to out of town investors because they have to sell. Go online to realtor.com and the various apartment/pm sites and figure out a *pessimistic* rental amount. Use that for your numbers. If you’re doing it right, you should almost IMMEDIATELY find that there are like very very few good deals out there (on MLS anyway).
Originally posted by @Michael Swan :
@Allyson Edwards

Do this experiment. Get someone else to call your PM and see if she answers the phone from 9-5 Mon-Fri. Have them leave a voicemail and see how long it takes to get back to them. Have another person leave a text message from another phone number. If I was a potential tenant and the PM I was calling from the ad does not answer the phone, I would just go on to the next ad. Many PM companies say they do not have time to answer the phone.

If potential tenants don't show up for their appointments to tour the property, what is wrong with the property?

If the PM is answering the phone and doing their job (very rare by the way), July and August are great times to rent out places. So, are you priced too high? After one month the rental rate should be dropped, after the second month in the summer, something must be wrong.

Reach out to me if you want me to give you more detailed info on what you should do.

Swanny

 I know your a veteran and well seasoned.. but I wanted to share this …  when I rolled into INdy to fund a turn key operator there I always check with PM I want to  make sure the PM is solid so that the buyers of the end product don't get a Morris invest experience.

the day I happened to be there was leasing day.. and I thought this was Genius.. there were about 7 or 8 folks there.. they were going over the vacants.. this PM runs 1000 plus units so of course every week there are a significant amount of vacant props.

these were all independent agents working on a fee base.. so then I drive by a few of the vacant homes to check on turn over quality and rehab quality .. there are 5 or 6 for lease signs in the yard.. each of those agents run out and put signs in the yard craigslist ( well maybe craigslist was not invented then this was 04... but any way.. I asked Aaron the owner I said why do you do this why is leasing not in house.. He said the owners pay the lease fee's and what happens is tenants will show up but leasing agents don't get there or whatever the tenant will do a drive by call one sign NO answer call the next until someone answer live.. that person usually gets the deal.. I thought this was genius personally and really helped the owners with down time during a turn over.. now of course this works in the SFR space were you can stick a bunch of signs in the yard.. but here we are 2018 and his is still humming along with his same methodology.. And its the bane of the industry in my mind NO one answers there phone and they hide behind texts.. I wont answer text messages personally. I hate them.

@Allyson Edwards   this is always a problem when your the highest rent in a given area.

I found and I have owned a bunch of higher end new construction.  so the payments are not like a 70k rental in a C class area were they maybe 300 a month..  the negative cash flow waiting for top rent .. will take you half a decade to recoup even if you get the top rent.. it becomes a double whammy.. not only will you end up having to lower your rent realistically  but you just paid 3 months of negative cash flow.. full on negative.. and now you rented fore break even so you wont recoup until rents get above break even and at that it will be a tiny amount.. so you can run the math.

Unless your confident that there is going to be serious appreciation like CA.. OR WA and other prime spots around the country like Charleston SC  there is basically no reason to buy any property for just the sake of  owning it if it does not throw off meaningful positive cash flow.  Your better off break even or a little negative and stay in CA. 

Also you mentioned Schools  well most folks have moved that are keen on Schools  as Schools have already started up.

Its just like having your lease expire in Nov.. I learned that the hard way.. no one wants to move DURING the holidays or at least very few top flight tenants.. so if I was going back into landlording my lease would all have June 1 expirations.. :)

additionally I learned this the hard way as well in Charleston SC I re did a 4 bed historic house to the studs out.. and built another 4 bed new construction on the back of the lot.. 850k into the deal with financing and cash.. we missed the move in date for collage kids because that is the highest and best use of those areas the rooms rent for 900 to 950 each.. I had it on the market for 1.4 million got an all cash offer on it. but it had to close by first week of Aug.. well we did not get our CO until mid sept we missed the date... fast forward it sat and finally close in April for 1,250.000 we lost 200k in profit and paid out 4k a month in negative we still did OK on it made 300k or so.. but we were really hoping to hit that 500k number.. timing when you have good schools is important.. the guys that bought it were from new York and they had a 1031 they had to move so they bought and they let it set until aug so they also went 4 or 5 months without income.. I did not want to rent it at market and then have to refurb it when I new the H and B was students.. we don't buy hold we like making big hits on value adds.. but that's a whole different business.

You could always try to add value with staging the apartment in a modern style to appeal most broadly then take pics that you will have for the future.    Either that or lower the price.

==>The problem with turning it around and selling too quickly is that, without enough appreciation you will potentially lose more money from the realtor fees.

I'm not sure there's good reason to think that a new-build townhouse in Statesville NC can be counted on to appreciate any time soon, especially considering that it was probably bought near the market peak. 

Hi @Jay Hinrichs ,

That sounds like a real strong company!! I am big enough now that I have attracted the big PM companies and I am sooooooooo happy they have repositioned so many value plays In the last 25 years.   The big guys want economies of scale too.  It is difficult to get a go getter PM for $90-$125.00 a month.  How hard will any of us work for $90-$125 a month.  One hour?  Maybe one hour and 30 minutes.  

Swanny

Another thing, people told me I would see NO appreciation in the Midwest and I just sold all my single family in Euclid Ohio that I first purchased for about $25,000 average a door back in 2014-2015 for $45,000, $45,000, $47,000, and $47500.  That is almost 100% appreciation in 3-4 years time.  These things rent for $775-$825.00 a month.  In a solid C class neighborhood.

Lots of Fake news out here saying that you don't get appreciation.  Jobs are coming back in droves, new Amazon fulfillment center, machining, manufacturing, etc..  not fast food minimum wage jobs.  Thank you Donald Trump!!!

Stay East of the New Amazon fulfillment center in NE Euclid and Lake County and you can't go wrong.  If you go west of the new Amazon fulfillment center in Euclid, you move to a D class area of Euclid, closer to Collinwood.  Feel free to contact me to discuss this area etc...

Swanny

@Allyson Edwards as a precious property manager you PM should be advising you on what to do to move forward. If they aren’t they aren’t an asset to you, they should be very proactive in getting your place rented. Other than price as many have said it could be your PM. I know you think they are doing their job, but I’d verify. I’d try calling from another number or have someone call and get a feel on how respond above and how they are selling the property. Trust but verify.

@Allyson Edwards . I live in NC and feel the same as most here that you are really at the high end of rental prices for this location. Therefore your pool is very small. 

At this point, you should really think more about damage control ... meaning limit your losses...

Maybe offer people a free month to move in, or 1/2 rent for the first x-months ... or convert the place into short term rental ... but it is a completely new area of real estate all together.

Your area in CA might have high rent, but it could be very suited for Short term rentals. I know lots of people in CA who are doing that now.

Good Luck

If you can’t rent the whole house for what you want, and you can’t lower your price any more, then you should look at renting out each room. 

For example:

Houses in a neighborhood rent for $1,500. Your mortgage is $1,700. Renters are unwilling to pay $1,700 to rent your house. if it’s a 3bdrm then rent out each room for $700. There’s more turnover and more management but you cash-flow. 

I would furnish the house. Then start calling around to HR Departments of large companies and try to angle for a relocation deal. Companies are always scrambling for housing, in nice school districts at reasonable costs.

I had a $1800/mo place that I was going to turn into a corporate for $3000 furnished. But luckily the house sold.

We had a problem something like yous. Property was listed for 2 months and our agent said he said he had not had very little interest and no showings. We took over and listed it at same price and had 8 showings in a week and rented the same week. Need. To say we formed our own property management company and rent all if our properties with very few issues.

Your property manager should be getting feedback from prospective tenants on why it's not renting. Probably the price is too high, but there might also be something about the property driving tenants away. If it's listed on the MLS and other agents are showing it, your PM should be able to get remarks/feedback from them. If he/she can't give you this, it's time to find a better PM, in my opinion.

Bad situation. Seems like everyone has helped you figure some of the issues that could be causing your vacancy. On another note, my rent has been right on with the market and I have left the property vacant for 2 months only because the right tenant didnt come along. Sometimes I feel like we have cycles of just crappy tenants to decide from and its not worth renting it to any of them.... to get the house back in 6 months completely trashed with them owing money. Good luck.
I haven't read through all of the responses here so ease excuse me if this has already been posted. Just a tip for future properties. Take the listing pictures and set up a ad on Zillow to gauge interest. This way you can play with the rents and see how people respond. If you get a million contacts, the rent is probably too low, so up the price. Same for the inverse.
@Allyson Edwards a couple of things... there are a lot of comments here and I haven’t read them all. I own property in California and I would advise a few things. 1. ARE YOU LISTED AT THE RIGHT PRICE? Really research where you are listed to insure your property is competitive with those around it. 2. DO YOU HAVE BAD CURB APPEAL? You stated that people call and then don’t follow up. This usually happens after people drive by and decide they don’t like the area. 3. CAN YOU UPDATE? You may not need to go in swinging hammers yourself but there may be some minor things you can do to make your property more appealing to tenants. These things pay off in the long run. They really do! 4.IS YOUR PROPERTY MANAGEMENT DOING WHAT THERE SUPPOSED TOO ? This one is rough... but I’ve had property managers that just never return calls and say it’s all on the tenant. I usually screen this by pretending im interested in the property and calling the property management. How long does it take them to show it? Do they pick up? Do they have the right property info. Having poor property management can bring your business to a dead hault! Always check in on them. I hope this helps!

Hi Allyson, 

I currently live and invest in the Lake Norman area.  If I were in your position I would sell ASAP and purchase something in an area that has more appreciation potential like Denver Concord,  or Kannapolis.  Here are the problems with statesville

1. Its in the middle of nowhere and is still many many years away from becoming a Charlotte suburb if it ever even happens.  

2. People who can afford that type of rent do not want to live in Statesville. 

3. There is businesses like Lowes and NASCAR in Mooresville but there is similar rents in Mooresville.  For example,  I am currently building a primary residence and renting a 3000 sqft new construction house that is 3 minutes from Lowes for $1900 per month. Your place is 25 minutes from Lowes. 

4. Schools in Mooresville are just as good as Troutman/Statesville

Sorry if this comes across condescending but I want you to know the truth about the area. Not sure who gave you advice on Statesville but I would fire them if you still work with them and never take advice from them again. 

Hello Everyone, 

I wish I could say thank you to EACH of you for your time and invaluable advice. I have read through all the comments and decided to lower the rent and do a lease option. Ive been lucky enough to speak to a few of you on PM and run some numbers, so I thank you for that...

Im also in the process of vetting the PM further by having someone call. If anyone would like to call and let me know what you find please feel free to do so.

I also spoke to a few more people in the area, (ie) police officer, warranty manager and sales associates from the area. Just a few more extra opinions thats all. I was told Amazon Hub is going in15 miles away, with 2000 new prospective jobs. 

Before acquiring the home I looked over the Iredale county population and housing estimates and planning and that is why I felt this to be a good situation. All population numbers were increasing and still are. New homes have been going up as well( i know that could drive supply and demand) but also these home are starting at $300,000 wouldn't that help as comparables? The house is only 1 exit from Troutman area which tends to be more desirable. I know Statesville has some c and d neighborhoods but this property is not located there.

Im not trying to make excuses just trying to see the brighter, bigger, long term picture. either way i have an exit strategy that I am moving on as we speak. 

I am also going to get in touch with all the people who called about the property and then for what ever reason decided to rent elsewhere, find out what drove their decision and then offer them lease to own, perhaps they would be more interested in doing that option versus just paying high rent.  I also have a local RE attorney I will be contacting in case there is anything legal I need to know for that area.

Again thank you to everyone, and especially those who contacted me personally I feel confident this will work out in the end and shall be a huge learning lesson as well.

@John M.

Great news that Amazon is coming to the area! They offer high paying salaries and will help increase the value of your home with the employees that wish to live close to where they work

Sounds like you've put in the effort to make things work and I'm sure you'll do great. I personally have lowered rent by $50 every week until I got enough interest in applicants to know the pricepoint was right. 

@Allyson Edwards I would have been nervous after 30 days if all you've gotten is flaky people. June is a strong rental month with school just getting out. I don't know your market, but 75 days in Kansas City or Indianapolis which is were I'm active, would be a long time. In my opinion, if this is a decent area, you should have had a tenant long ago.